Saipan continues to have strong potential as a gaming outpost in the Pacific, however stakeholders need to take decisive action to improve regulation and find a suitable operator.
The gaming market has come under scrutiny for both regulatory and financial issues for the last several years. The market for the most part has a monopolistic operator in Imperial Palace International (IPI) that continues to plague the jurisdiction for a host of reasons.
This was not solely the result of the Great Shutdown but only accentuated the challenge with IPI’s operations and reputation within the market. The pandemic has only amplified it over the last two years.
Whether it is the delaying of the sale of assets or the last minute payment to keep themselves out of receivership, there are more and more questions that arise each day as to how IPI, the regulator in the Commonwealth Casino Commission, and overall the government intends to proceed forward with IPI or in a new direction.
Despite all of the challenges, IPI continues to find ways to survive another day. As the new year begins, it may be the beginning of the end for this long chapter, or it may be just the beginning of a new chapter that may offer the same result.
Looking back on 2021, the year began with a series of court cases that largely surrounded employment practices. Many believed that this would begin the fall of IPI. However, it has been elongated into survivability several months later.
The court cases continue to pile on in addition to the failure to pay debts, and a host of other regulatory issues. This has also put the regulatory agency in a poor position. Without revenue coming in, it continues to lay off employees which further limits their ability to regulate the gaming business and IPI. One of the chief roles of the Commonwealth Casino Commission is to ensure the suitability of the operator and maintain a strong market. This is not achievable in the current climate
One of the more interesting ends to 2021 was between the Legislature and the Governor. Each year, the Legislature is to approve a budget for the government from the operator. This year, the Legislature put an item in the budget to fund and conduct a study to evaluate the existing gaming market, what the future may look like, as well as provide an analysis of the current regulatory structure. However, Governor Ralph Torres line-itemed vetoed this specific budget item after it had passed both houses. This was under the pretext that it would be duplicative to what his outside consultants continued to provide the Executive Branch after years of work and studying of the issue.
While the line item was overridden in the House, the Senate failed to take up the issue in enough time so the Governor’s veto stands. Some fail to realize some additional checks and balances in government may be a good thing. As it stands today, there are still no solid answers as to the future of the market and the future of IPI as an operator.
As we enter year three under the SARS-CoV-2 pandemic, the return of Chinese customers will likely look very different than it did before this began. The flow of money will not be what it used to be, especially when it comes to the VIP segment, a segment that was a key component of the IPI operations.
Regardless, Chinese travel will likely still take some time to return. With the recent variant of omicron, it is unlikely that China will lessen its current zero COVID tolerance policy. This policy will likely stay in place through the 2022 Winter Olympics that will be hosted in Beijing in February. Like many things, the event itself has become political as numerous countries are imposing a diplomatic boycott over human rights issues.
This is in addition to the continued geopolitical tensions that are elevated in the region between the United States, its allies, and China over a host of issues beyond human rights.
The stakeholders in Saipan have to decide if they want to take a serious look at reform and how to erase the challenges that IPI has presented to them. Simply put, the current gaming playbook does not work and there is a distinct opportunity for Saipan to be a solid gaming outpost in the Pacific.
It would allow for the jurisdiction to thrive under a strict regulatory framework that finds a suitable operator that understands the market opportunity. As some stakeholders have been asking questions as to how to develop the best path forward, others are watching the industry crumble around them without taking any decisive action.
The stakeholders in Saipan are at a crossroads. The only logical answer is to understand what a path forward looks like that would bring the market into regulatory compliance and an operator that understands the market and desires to operate within those regulations.
As a U.S. jurisdiction, Saipan’s opportunity is strong to be a good gaming market in the Pacific. It is up to the stakeholders to decide if they want to take the steps to craft a better market for the future.
Brendan D. Bussmann is a Partner and Director of Government Affairs with Global Market Advisors (GMA).